A friend tells you, I just ignore the income statement when Im making an investment decision All I care about is the cash, so that the company can pay me dividends The balance sheet tells me about the cash the companys got the cash flows statement tells me about its changes in cash Who cares about ...

Friend is partially rightthe income statement is full ...

A friend tells you, I just ignore the income statement when Im making an investment decision. All

Question:

A friend tells you, “I just ignore the income statement when I’m making an investment decision. All I care about is the cash, so that the company can pay me dividends. The tells me about the cash the company’s got; the cash flows statement tells me about its changes in cash. Who cares about the income statement? It’s just a bunch of inaccurate stuff loaded with estimates.” Do you agree with your friend’s statements about the nature of the income statement and about its lack of importance? Explain why or why not.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...